Ceat, MRF, IOCL: Oil-linked stocks slip as crude oil rises above $81/bbl

Oil-linked stocks-- paints, aviation, oil manufacturing companies (OMCs), oil refineries, and tyre-- declined in trade after Brent crude oil rose above $81 a barrel to its highest in more than four months. 

 

The prices increased after the US Treasury imposed wider sanctions on Russian oil on Friday, as per reports. These sanctions are expected to affect Russian crude exports to top buyers China and India. The new sanctions included producers Gazprom Neft and Surgutneftegas, as well as 183 vessels that have shipped Russian oil, targeting the revenue Moscow has used to fund its war with Ukraine.

 

Brent crude futures climbed $1.48, or 1.86 per cent, to $81.24 a barrel by 0113 GMT after hitting an intraday high of $81.49, the highest since August 27. Brent has risen by more than 6 per cent since January 8. 

How does an increase in crude oil prices impact paints, aviation, oil manufacturing companies (OMCs), oil refineries, and tyre stocks?

Paints stocks: A rise in crude oil prices negatively impacts paint stocks as paint manufacturers rely on petrochemicals, which are derived from crude oil, as key raw materials in the production of paints, coatings, and other products.

 

Around 10 AM, Asian Paints was down 1.37 per cent, Kansai Nerolac was down 2.05 per cent, Akzo Nobel India was down 0.70 per cent and Berger paints was down over 0.50 per cent. In the intraday trade, the stocks in the pack fell up to 2.2 per cent.

 

Tyre stocks: Similar to paints, crude oil is a key raw material in the production of tyres, particularly in the form of synthetic rubber, carbon black, and various other chemicals. Thus, any increase in crude oil prices leads to an increase in the input cost of tyre companies.

 

Around 10 AM, MRF shares were down 1.39 per cent, Ceat was down 0.23 per cent, JK Tyre was down 2.79 per cent and Balkrishna Industries was down 1.02 per cent. The stocks in the pack fell up to 3.3 per cent intraday.

 

Aviation stocks: As aviation fuel is derived from crude oil, it forms a major part of airlines' expenses.

 

Around 10 AM, InterGlobe Aviation (IndiGo) stock was down 4.09 per cent and SpiceJet was down 0.30 per cent. The stocks in the pack fell as much as 7.2 per cent intraday.

 

Oil marketing and refinery company stocks: The cost of crude oil is a major input cost for refineries as they process crude oil into refined products such as gasoline, diesel, jet fuel, kerosene, and other petrochemicals. 

 

Besides, oil marketing companies (OMCs) generally purchase crude oil from the international market and refine it into various products. They sell refined products to consumers, including gasoline, diesel, kerosene, and LPG. Thus, when crude oil prices rise, the cost of the raw material that OMCs purchase for refining increases. 

 

Around 10 AM, OMC stocks declined, Hindustan Petroleum Corporation (HPCL) was down 6.14 per cent, Bharat Petroleum Corporation (BPCL) declined 1.68 per cent and Indian Oil Corporation (IOC) was down 3.61 per cent. The stocks in the pack fell up to 6.4 per cent intraday.

 

Besides, among oil refineries, Chennai Petrochemical slipped 1.15 per cent, and Reliance Industries (RIL) dipped 0.80 per cent. However, Mangalore Refinery was up 0.36 per cent. The stocks in the pack fell as much as 1.8 per cent intraday.